Homegrown specialty property and hotel group Roxy-Pacific Holdings achieved a net profit of S$24.9 million in the first half of 2011, up 14 percent from S$21.9 million over the same period last year. This, despite the 16 per cent year-on-year decline in its revenue to S$97.1 million, mainly due to lower contributions from its property development segment.
The group said it remains confident going forward, even eyeing up to S$150.0 million worth of land acquisitions in either the residential or commercial sectors.
So far this year, Roxy-Pacific has spent about the same amount acquiring land such as a site in the Changi district which it plans to develop for commercial use.
The property developer currently has a landbank of seven sites, giving it a gross floor area of 300,000 square feet, to be developed into residential and commercial assets that would be launched over the next six to nine months.
In an interview with Biz Daily, Teo Hong Lim, Roxy-Pacific’s executive chairman and CEO, shared about the company’s growth strategy and how it will capitalise on business opportunities in the longer term.
Your recent land acquisitions have been more on retail/office segment. So are you shifting towards that segment and away from residential?
We have been doing that shift since last year. Well, we want to call it diversification.
Through the years, we realised that there’s hardly any opportunities for ownership of retail shops and strata offices.
Last year, when we launched our project, Space@Kovan, we somehow revolutionised that thinking as we offered strata titles and we were sold out in just one or two days. I think a lot of investors found this as a new product type for them to look into capital gains.
So what seems to be the problem in residential segment? Is it because of the cooling measures introduced by the government?
There are a lot of factors actually. The cooling measures came in at a time when everybody is still flush with funds. For commercial property, you still can achieve 80 per cent financing, whereas in the residential, if it’s a second property, you can only settle for 60 per cent financing. And if you sell your residential property, you are slapped with a huge stamp duty whereas in commercial, you don’t have that category.
And all these people with extra cash where do they invest it in? I say that now, investors tend to go towards commercial properties. So for us offering a strata title for retail investors, we sort of created a new buying trend.
Are you expecting more cooling measures?
We don’t know, but looking at the residential segment now, it is already feeling the heat. The sales are softening; however, prices won’t go down that much. It’s a situation where the buyers are now choosing their properties well.
Can you share with us your buyers’ profile? And what’s your sense of their buying sentiment amid all the cooling measures introduced in the market?
More than 90 per cent are still locals. And it’s a mix of end-users and investors.
The buying interest is still there but not as strong compared to few months ago. Buyers now tend to be more careful of their positions.
If in the past, you sell your current property to buy a new one, the most you have to lose is just the 3 per cent stamp duty. Now, it’s a different ballgame. You can lose 10 per cent on stamp duty alone, even if you sell at the same price.
So every decision must be weighed very carefully. Because with the current condition of the local property market, whether you’re an investor or end-user, you cannot afford to make mistakes.
What has been the direct impact to your operations?
For us, it has been more challenging but operationally, we didn’t have that much change.
It has been our strategy that in good or bad times, we take each and every single project launch very seriously. We do the right design; nice brochure and showflat, then engineer a very good launch.
Also, we are typically confident that the land that we secure give us the right margins, and we are very location-driven…because when the market starts to have a wait-and-see approach, buyers would then nitpick on location.
But what happened to your NottingHill Suites (at Toh Tuck Road) project? Why did you hold off the launch?
We actually soft-launched the project without demolishing the old building and we set the showflats behind it, so there was a visibility problem. Plus parking in the area was also a challenge, which was not visitor friendly.
So we thought that it’s better to put a temporary break on the project while it’s not yet overexposed. We have already demolished the old building to open up the whole plot of land, and right now we are re-strategising to come up with a full launch at the end of this year.
How about the issue of shoebox units, how are you addressing that?
Actually the sizes are increasing. The authorities have this unwritten rule on requiring the developers to meet a minimum of 35.0 square metres for every residential unit, and that excludes the aircon lodge and the balcony. So including all these areas, you are actually getting a unit that has an area of more than 400 square feet.
In the past, we used to create a 1-bedder at 330 sq ft. So now that sizes go up to more than 400 sq ft, it doesn’t make sense for us to do a 1-bedder anymore. We are now progressing to do a compact-sized 2- or 3-bedders.
Roxy-Pacific has been very aggressive in terms of acquiring suitable land parcel. Has there been a change in your strategy with what’s happening in the market right now?
Not really. If you look at the land parcels that we buy, we tend to do all sort of sizes, we do small projects, we do big-sized ones, we are not very choosy. We entertain all opportunities that come our way, even engaging the services of individual agents in our network.
Our system, our project management teams are seasoned to do all types of projects, even small ones like on a 10,000 sq ft plot of land. While some developers favour economies of scale, our philosophy is different in the sense that we are more flexible.
Some developers have already established footprint outside Singapore, can we expect Roxy-Pacific to do the same?
In a difficult (local) property market where we hear some developers complain that they have challenges securing land that can give them good profit margin, the margins that we are churning out are still quite respectable at some 20 per cent or more.
Well, we tried to look at some opportunities overseas and when we evaluated, we could be getting similar or lesser profit margin compared to what we are getting down here.
But when we go there, where are we getting the set of contractors that we are familiar with, the architects and all our staff? It’s not something that we should overrule but we still feel that Singapore market still offers us good opportunities.
We are not closing our doors to overseas opportunities… I guess it’s just a matter of perfect timing.
Any plans to expand your hotel operations?
In the last two years, we did a couple of state land tenders because most hotel sites are still coming from state land. But unfortunately, we didn’t get it. So we are still in constant search.
But whether its hotel, office, retail or residential, every day we are on guard for opportunities. If we find one, we do it.
Finally, what are the challenges that you see going forward?
The market now is not as easy as one or two years ago when developers were having a breeze in selling their projects at a good margin. But for us, we just stick to our same old set of strategies: In every period, whether good or bad, just do everything right and just do the launch.
Developers who have sold well in a bull market may find it hard to adapt to a slowing market. So the bottomline is: don’t get complacent.
